9911796707
TMI Blog2008 (11) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... n though by our order dated 06.11.2008 notice had been issued to the respondent/assessee, despite service, the assessee has not entered appearance. This left us, with no other alternative, but to hear the matter in the absence of the respondent/assessee. 3. The short question which has arisen for our consideration in the present appeal is, whether in the facts and circumstances, as found by authorities below in the instant case, the interest earned on fixed deposits kept by the respondent/assessee with the bank would enter the ring of profits under the provisions of Section 80 HHC of the Act. The other supplementary issue which arises for consideration is, whether the respondent/assessee ought to be allowed the benefit of 'netting' i.e. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Act was issued and duly served upon the respondent/assessee. During the course of scrutiny, the Assessing Officer came across a credit entry in the sum of Rs 6,15,386, in the profit and loss account of the respondent/ assessee, for the relevant assessment year on account of interest received from the bank. The respondent/assessee on being queried, in respect of the interest credited to the profit and loss account, explained as under :- 'Receipt from Bank Rs 23,14,800/- Payment to Bank Rs 16,99,413/- Balance credited to Profit and Loss a/c Rs 6,15,383/-' 7. The respondent/assessee's explanation in short was that it had credited a sum of Rs 6,15,383/- to its profit and loss account after netting the interest received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving been incurred for the purpose of business, was allowable as deductions from business income. In other words, the CIT(A) held that interest paid on overdraft facility cannot be allowed as a deduction against the interest income which is chargeable to tax under the head 'income from other sources' as it was not incurred in earning income by way of interest. The respondent/assessee being aggrieved carried the matter in appeal to the Tribunal. The Tribunal by a brief order allowed the appeal of the respondent/assessee. The Tribunal gave reasons which are contained in paragraph No. 6 of the impugned judgment, which reads as under :- ''..We have heard the parties and perused the record of the case. The assessee is a 100% exporter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he discussion with respect to both these situations is summarized in paragraphs 35 and 36 of the judgment at pages 496 and 497, which reads as under:- '35. Turning to be submissions in the present cases, as regards the first of the categories, viz, the parking of surplus funds there should be no difficulty at all. In view of the large number of the decisions of the hon'ble Supreme Court in the context of section 80 HHC itself, we are unable to accept the contention of the assessees based on Snam Proghetti [1981] 132 ITR 70 (Delhi) that interest earned on parked surplus funds should qualify as business income. Clearly, Snam Proghetti [1981] 132 ITR 70 (Delhi) was not rendered in the context of section 80 HHC and cannot but be confined to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree judgments of the Kerala High Court on the same issue, we are inclined to follow the view expressed by the Kerala High Court on each of these occasions. We accordingly hold that interest earned on fixed deposits for the purpose of availing of credit facilities from the bank, does not have an immediate nexus with the export business and therefore has to necessarily be treated as income from other sources and not business income. Question (a) and issue (i) are answered accordingly.' 11. It is thus clear that, in both situations, this Court has held that interest earned does not have any immediate nexus with the export business and hence, will have to be treated as 'income from other sources'. 12. As regards the issue of the 'nettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived is found to have a nexus with the business, still it remains to be excluded from the profits of the business by virtue of Explanation (baa)(1), but the claim is that the quantum of such interest income to be excluded must be determined in accordance with the computation provisions relating to business by allowing expenditure by way of interest which bears a nexus with the interest receipt. The computation provisions include section 37(1) under which any expenditure incurred or laid wholly and exclusively for the purpose of the business is to be allowed as a deduction. Therefore, any expenditure incurred which has a connection or nexus with the interest receipt has to be allowed as a deduction and only the balance can be excluded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
